"How will coronavirus impact the Georgian economy?" – PMCG’s Review

PMCG Research has developed three possible scenarios for the development of the coronavirus crisis in Georgia, each of which correspond to different periods of time for which containment measures remain in place.

Scenario I: Optimistic

Economic activity completely stalls for 2.5 months, and then partially stalls for a further three months. Consequently, economic activity partially resumes by the start of June and fully resumes by the start of September.

Scenario II: Less pessimistic

Economic activity completely stalls for four months, and then partially stalls for a further three months. Consequently, economic activity partially resumes by the middle of July and fully resumes by the middle of October.

Scenario III: Very pessimistic

Economic activity completely stalls for six months, and then partially stalls for a further three months. Consequently, economic activity partially resumes by the middle of September and fully resumes by the middle of December.

PMCG says that if the optimistic scenario proves true, Georgia’s real economy is expected to shrink by 4.3 per cent, which would be more severe than in 2009 (-3.7%). Should the less pessimistic scenario play out, the Georgian economy is expected to decrease by eight per cent while in the event of the very pessimistic scenario becoming reality, the expected fall is 12.9 per cent.

For all three of the proposed scenarios, PMCG has identified the five sectors likely to be most affected and the five sectors likely to be least affected.

The following five sectors are expected to be the most severely affected:

Arts

Entertainment and recreation

Accommodation and food services

Transport and storage

Wholesale and retail trade

The five sectors expected to be least affected are:

Information and communication

Human health and social activities

Professional, scientific and technical activities

Public administration

Mining

Employment/unemployment according to 3 scenarios

In the optimistic scenario PMCG forecasts a 6.3 per cent decrease in the total number of employed persons in Georgia, while job losses are forecast to be greater in the

less pessimistic scenario (-9.8%) and in the very pessimistic scenario (-14.4%).

Regarding the average unemployment rate in 2020, in its optimistic scenario, PMCG expects an increase of 14.1 per cent, while for the less pessimistic scenario the expected increase is 17.7 per cent and for the very pessimistic scenario it is 22.7 per cent.

Additionally, it is likely that the negative impact of the pandemic will change the structure of the labor force in Georgia. The self-employed, which represented 44 per cent of the Georgian labour force in 2019, will be particularly vulnerable to the changes, said PMCG.